5 Dividend Funds Thriving in 2026

The first half of 2026 brought good news for equity-income investors: The typical dividend-oriented strategy finally outperformed the US broad stock market. After trailing the S&P 500 in eight of the 10 calendar years from 2016 to 2025, the average dividend-oriented strategy beat the index’s 10.2% rise by more than half a percentage point in 2026 through June 30.

Dividend strategies have enjoyed some tailwinds this year. First came the so-called Saaspocalypse, a sharp software stock downdraft stemming from fears that artificial intelligence would disrupt their platforms. That hammered many previously hot technology stocks that tended to pay lower dividends or none. The AI dread simultaneously spurred investors to turn to halo stocks, so-called for their heavy asset, low obsolescence business models that rely on physical infrastructure to produce physical products that AI cannot replace. Such firms often pay solid dividends and have been left behind by the past decade’s booming growth market.

Then in the second quarter, companies involved in building AI infrastructure led, while the Magnificent Seven stocks—Alphabet GOOG, Amazon.com AMZN, Apple AAPL, Meta Platforms META, Microsoft MSFT, Nvidia NVDA, and Tesla TSLA—and halo stocks lagged. Many chip stocks, including dividend-payers like Broadcom AVGO and Texas Instruments TI soared. Smaller-cap stocks also surged, which helped because dividend fund portfolios have recently tended to have lower average market caps than the broad market.

The result was six months of significant reversals. The previously hot Russell 1000 Growth Index gained just 5.3% in the period, while the Russell 1000 Value Index jumped 15.9%. More dramatically, the small-cap Russell 2000 Index leapt 22.6%, more than double the large-cap Russell 1000’s 10.3%. In the past decade, the value index had only topped the growth benchmark in just two calendar years, and small-caps hadn’t beaten large caps in any year since 2016.

Among the broad equity-income universe of strategies, dividend strategies seeking higher income tended to top equity-income funds that seek lower durable yields, while dividend-growth funds tended to lag. Below are some funds that our Manager Research department rates highly that did well in the six-month period.

The small-cap surge helped WisdomTree US Small-Cap Dividend ETF DES, which gained 22.7% in 2026’s first six months. This Bronze-rated passive strategy assembles a portfolio of 500 dividend-paying stocks screened for quality and momentum and weighted by projected cash dividends rather than by yield. It still offered a healthy 2.4% 12-month yield as of May 2025. Satellite communications operator Iridium Communications IRDM, semiconductor firm Kulicke & Soffa KLIC, and energy equipment firm Kodiak Gas Services KGS were top performers.

A similar, actively managed strategy is Principal Small-Midcap Dividend Income PMDIX, which jumped 19% in the first half of 2026. It holds between 60 and 90 smaller stocks that pay out more than 60% of earnings in dividends; its recent 12-month yield was 1.2%. Its team seeks solid firms whose stocks are cheap due to temporary issues or industry disruptions. The emphasis on meaningful, growing dividends drives this portfolio’s 90% active share compared with its Russell 2500 Value prospectus index, where stocks that meet its standards are fairly rare. A bevy of its picks gained 100% or more in the first half of 2026, including digital storage firm Western Digital WDC, as well as semiconductor manufacturing firms Amkor Technology AMKR and MKS MKSI, which were recently the portfolio’s two top holdings.

Among large-cap dividend strategies, one of the better performers was Gold-rated Capital Group Dividend Value ETF CGDV. This strategy targets a yield 30% higher than the S&P 500 index from a portfolio whose holdings have mostly paid dividends over the past 10 years. It’s a rather compact portfolio of 56 stocks, where top holdings are a mix of top mega-caps such as Microsoft and smaller companies like cruise-line Royal Caribbean RCL and HVAC specialist Carrier Group CARR. It gained 13.7% in the first half of 2026 and recently had a 12-month yield of 1.2%. Its top contributor by far was semiconductor equipment firm Applied Materials AMAT, recently a top 10 holding that gained more than 180% in the first half of 2026.

JPMorgan Equity Income HLIEX gained 12.9% over the six-month period. Its team earns Above Average People and High Process ratings. The portfolio’s roughly 100 holdings have consistent earnings, high returns on invested capital, and solid dividend yields that represent modest payouts of profits. Top holdings recently came mainly from the financial and tech sectors—Alphabet GOOG, Morgan Stanley MS, Wells Fargo WFC, for instance. A clutch of tech firms involved in the AI buildout, such as fiber king Corning GLW, storage maker Seagate STX, and analog chipmaker Texas Instruments TI, have powered the portfolio so far this year.

It has been another tough period for most dividend-growth strategies. The S&P US Dividend Growers Index’s 15.3% gain for the three years ending in 2025 lagged the Russell 1000’s 22.7%, and the former benchmark’s 8.6% gain in the first half of 2026 again trailed the broad market.

Not all dividend-growth strategies have struggled, however. Gold-rated Schwab US Dividend Equity ETF SCHD, however, posted a 17.5% jump in the first half of 2026. This passive ETF tracks the Dow Jones US Dividend 100 Index, which has 100 constituents that boast at least 10 years of uninterrupted dividends and five years of stable dividend growth. Rebounding health insurer UnitedHealth’s UNH 30% gain and Texas Instruments’ TI 71% leap drove results for the fund that didn’t own a single Magnificent Seven stock at the end of June 2026.